I am dealing with an estate where the sole beneficiary dealt with the transfer of a unit trust into his name during the administration. I have received a consolidated tax certificate for the asset up to 2017. The unit trust was transferred in May 2016. There is some discussion as to whether the executors are liable for the income tax up to 2017 or whether we should apportion the income and only pay up to the date transfer of the asset. It would seem easier to pay up to the end of the tax year even though the income has gone to the beneficiary since May 2016. The beneficiaries accountant is of the view that we should pay for the whole tax year as we are still within the administration period. Any guidance would be appreciated.

Once an asset has been transferred to a beneficiary, I cannot imagine why the estate might remain liable for the tax on any future distribution, other than one which was XD at the date of the transfer.

Even if the unit trust manager issues a consolidated tax certificate annually, does it not identify when any distribution within that year was due and payable?

It would be interesting to learn of the justification supporting the accountant’s assertion that the estate is liable to disclose the income and pay the tax, other than that the administration period has not yet concluded. (Would the accountants assert the same if it was an investment property that had been transferred, generating significant annual rent?)

The accountant has indeed asserted that as the estate is still in its “administration period” any tax payable is the liability of the executors (even though the the asset is no longer within the control of the executors). Nothing actually turns on the point as there is only one beneficiary and he is a basic rate tax payer. I suspect it is more convenient for the beneficiary if we declare the tax.

Personally I think the accountant is wrong. If the asset has been transferred in specie as part of his entitlement then the income arising after that date is reportable by and taxable on the beneficiary.

I am not sure I agree that it would be more convenient for the executors to report the income either. As this is a unit trust it will be generating dividends or interest. The Executors do not have any dividend or interest allowances to set against that so if the beneficiary has those allowances available wont that leave him in the position of having to submit a repayment claim?

Also, is it right for the Executors to report income and pay tax when they are not liable to? If the liability rests with the beneficiary and it is his responsibility to declare the income could this leave him vulnerable to penalties for non-disclosure irrespective of the fact that the correct amount of tax may well be paid in the end? It might not be a point which HMRC would take.